Hallenstein shares drop to 4-year low on rag trade woes

Jan. 17
(BusinessDesk) - Shares in Hallenstein Glasson sank to a
four-year low after the clothing chain slashed its
first-half earnings outlook on tepid Christmas sales, in
another sign the rag trade is struggling to recover from a
protracted downturn.

The stock dropped 8.6 percent to
$3.20 and earlier touched $3.10, the lowest since December
2009, adding to yesterday’s 18 percent slide when the
Auckland-based company warned earnings will fall to between
$6 million and $6.3 million in the six months ending Feb. 1
from $10.3 million a year earlier.

Last year the retailer
had been among a group of clothing chains who gave profit
warnings as tough competition in Australia put a squeeze on
margins and as the warm winter kept consumer spending on
apparel under wraps. Hallenstein chairman Warren Bell had
warned of a possible further downgrade at the annual meeting
on Dec. 12 unless sales picked up in the crucial peak summer
trading period.

“This is the third profit warning
they’ve had in a few months,” said Mark Warminger, who
helps manage $710 million in New Zealand equities at Milford
Asset Management in Auckland. “Apparel retailing is tough
across New Zealand and Australia.”

Government figures
showed a slump in consumer spending on apparel in the
September quarter, with retail sales of clothing, footwear
and accessories sliding 6.8 percent in the three months
ended Sept. 30, the biggest quarterly fall since the series
began in 1995.

Since then, consumer spending on electronic
cards, which account for almost two-thirds of retail sales,
increased in two of the last three months of 2013, and the
New Zealand Institute of Economic Research’s December
quarterly survey of business opinion showed merchants
reported the strongest retail sales since September
2002

Milford’s Warminger said with the exception of
outdoor equipment chain Kathmandu, the local retail sector
is fairly unattractive for investors and still faces
structural issues.

“Through the global financial crisis
people got used to buying things in a sales period or at a
discount,” he said. “That’s continued through for the
last couple of years, even though the economy’s
recovered.”

Apparel retail stocks struggled over the
past year relative to the NZX All Index, which gained 15
percent. Shares in Hallenstein are down 35 percent over the
past 12 months, Pumpkin Patch dropped 49 percent and Postie
Plus shares halved.

Other retailers haven’t fared as
poorly, with shares in Warehouse Group up 21 percent over
the past year, and Kathmandu climbing 61 percent.

One of
the issues facing retailers is finding the balance between a
physical store presence and online offerings, something
Hallenstein chief executive said in November were part of a
fundamental change in the business model. He is among
retailers to have called for the tax department to be more
stringent in collection goods and services tax on New
Zealander’s purchases from overseas
websites.

The Wellington-based BusinessDesk team led by former Bloomberg Asian top editor Jonathan Underhill and Qantas Award-winning journalist and commentator Pattrick Smellie provides a daily news feed for a serious business audience.

The whitebait fry - considered a delicacy by many - are the juveniles of five species of galaxiid, four of which are considered threatened or declining. The SMC asked freshwater experts for their views on the sustainability of the whitebait fishery and whether we're doing enough to monitor the five species of galaxiid that make up whitebait. More>>

The New Zealand government's accounts recorded a smaller-than-forecast deficit in the first four months of the fiscal year on a higher-than-expected inflow of corporate and goods and services tax. More>>

Steel & Tube Holdings, along with two other companies, will be prosecuted by the Commerce Commission following the regulator's investigation into seismic steel mesh, while Fletcher Building's steel division has been given a warning. More>>

• For car owners, a 13% reduction in the average Motor Vehicle levy • For businesses, a 10% reduction in the average Work levy, and changes to workplace safety incentive products • For employees, due to an increase in claims volumes and costs, a 3% increase in the Earners’ levy. More>>